On December 21, 1982, Burlington Northern, Inc., made a hostile tender offer for El Paso Gas Co. Through a wholly owned subsidiary, Burlington proposed to purchase 25.1 million El Paso shares at $24 per share. Burlington reserved the right to terminate the offer if any of several specified events occurred. El Paso management initially opposed the takeover, but its shareholders responded favorably, fully subscribing the offer by the December 30, 1982 deadline.

Burlington did not accept those tendered shares; instead, after negotiations with El Paso management, Burlington announced on January 10, 1983, the terms of a new and friendly takeover agreement. Pursuant to the new agreement, Burlington undertook, inter alia, to (1) rescind the December tender offer, (2) purchase 4,166,667 shares from El Paso at $24 per share, (3) substitute a new tender offer for only 21 million shares at $24 per share, (4) provide procedural protections against a squeeze-out merger of the remaining El Paso shareholders, and (5) recognize ‘‘golden parachute’’ contracts between El Paso and four of its senior officers. By February 8, more than 40 million shares were tendered in response to Burlington’s January offer, and the takeover was completed.

 The rescission of the first tender offer caused a diminished payment to those shareholders who had tendered during the first offer. The January offer was greatly oversubscribed and consequently those shareholders who retendered were subject to substantial proration. Petitioner Barbara Schreiber filed suit on behalf of herself and similarly situated shareholders, alleging that Burlington, El Paso, and members of El Paso’s board violated §14(e)’s prohibition of ‘‘fraudulent, deceptive or manipulative acts or practices * * * in connection with any tender offer.’’ [Citation.] She claimed that Burlington’s withdrawal of the December tender offer coupled with the substitution of the January tender offer was a ‘‘manipulative’’ distortion of the market for El Paso stock. Schreiber also alleged that Burlington violated §14(e) by failing in the January offer to disclose the ‘‘golden parachutes’’ offered to four of El Paso’s managers. She claims that this January non-disclosure was a deceptive act forbidden by §14(e).

The District Court dismissed the suit for failure to state a claim. * * *

***

We are asked in this case to interpret §14(e) of the Securities Exchange Act, [citation]. The starting point is the language of the statute. Section 14(e) provides:

It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative. [Citation.]

* * * Petitioner reads the phrase ‘‘fraudulent, deceptive or manipulative acts or practices’’ to include acts which, although fully disclosed, ‘‘artificially’’ affect the price of the takeover target’s stock. Petitioner’s interpretation relies on the belief that §14(e) is directed at purposes broader than providing full and true information to investors.

Petitioner’s reading of the term ‘‘manipulative’’ conflicts with the normal meaning of the term. We have held in the context of an alleged violation of §10(b) of the Securities Exchange Act:

Use of the word ‘‘manipulative’’ is especially significant. It is and was virtually a term of art when used in connection with the securities markets. It connotes intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.

* * * The meaning the Court has given the term ‘‘manipulative’’ is consistent with the use of the term at common law, and with its traditional dictionary definition.

***

Our conclusion that ‘‘manipulative’’ acts under §14(e) require misrepresentation or nondisclosure is buttressed by the purpose and legislative history of the provision. Section 14(e) was originally added to the Securities Exchange Act as part of the Williams Act, [citation]. ‘‘The purpose of the Williams Act is to insure that public shareholders who are confronted by a cash tender offer for their stock will not be required to respond without adequate information.’’ [Citation.]

***

Nowhere in the legislative history is there the slightest suggestion that §14(e) serves any purpose other than disclosure, or that the term ‘‘manipulative’’ should be read as an invitation to the courts to oversee the substantive fairness of tender offers; the quality of any offer is a matter for the marketplace.

***

We hold that the term ‘‘manipulative’’ as used in §14(e) requires misrepresentation or nondisclosure. It connotes ‘‘conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.’’ Ernst & Ernst v. Hochfelder [see Chapter 45]. Without misrepresentation or nondisclosure, §14(e) has not been violated.

Applying that definition to this case, we hold that the actions of respondents were not manipulative. The amended complaint fails to allege that the cancellation of the first tender offer was accompanied by any misrepresentation, nondisclosure or deception. The District Court correctly found, ‘‘All activity of the defendants that could have conceivably affected the price of El Paso shares was done openly.’’ [Citation.]

***

 The judgment of the Court of Appeals is affirmed.